The Finland based company has signed a strategic brand and intellectual property licensing agreement with a newly formed Finland firm HMD Global to develop Nokia-branded mobile phones and tablets for the next ten yearsVikas SN | ETtech | Updated: May 18, 2016, 16:22 IST

Iconic mobile phone brand Nokia has confirmed that it is returning to the mobile phones and tablet market, about two and half years after selling its devices and services business to Microsoft.

The Finland based company has signed a strategic brand and intellectual property licensing agreement with a recently formed Finland firm HMD Global to develop Nokia-branded mobile phones and tablets for the next ten years.

As per the agreement, Nokia has granted an exclusive global license to HMD Global (excluding Japan) and will receive royalty payments for sales of Nokia-branded mobile products, covering both brand and intellectual property rights. The company said HMD's new smartphone and tablet portfolio will be based on Android platform.

Nokia will provide HMD with branding rights and cellular standard essential patent licenses in return for royalty payments and will take a seat on HMD's Board of Directors but won't be making any financial investment or holding equity in HMD.

Earlier in the day, Microsoft announced that it would be selling its feature phone business to HMD Global and Foxconn subsidiary FIH Mobile for $350 million, to focus on Windows 10 Mobile and support Lumia phones.

As part of this deal, Microsoft will transfer substantially all of its feature phone assets, including brands, software and services, care network and other assets, customer contracts, and critical supply agreements.

The deal is expected to close in second half of 2016, after which around 4,500 employees will have "the opportunity to join" HMD Global or FIH Mobile, Microsoft said.

HMD Global to invest $500M to market Nokia-branded phones & tablets

HMD Global said that it has conditionally agreed to acquire from Microsoft the rights to use the Nokia brand on feature phones, and certain related design rights to complete its portfolio of Nokia branding rights. It claimed these agreements would make them the sole global licensee for all types of Nokia-branded mobile phones and tablets.

HMD Global now plans to invest over $500 million over the next three years to support the global marketing of Nokia-branded mobile phones and tablets. This capital has been raised via its yet-undisclosed investors and profits from the acquired feature phone business.

Once the Microsoft transaction closes, HMD will be led by former Nokia executive Arto Nummela as CEO. Nummela is currently the head of Microsoft's Mobile Devices business for Greater Asia, Middle East and Africa as well as Microsoft's global feature phones business.

Florian Seiche, who is currently Senior Vice President for Europe Sales and Marketing at Microsoft Mobile, will be the president at HMD.

"We will be completely focused on creating a unified range of Nokia-branded mobile phones and tablets, which we know will resonate with consumers. Branding has become a critical differentiator in mobile phones, which is why our business model is centered on the unique asset of the Nokia brand and our extensive experience in sales and marketing. We will work with world class providers in manufacturing and distribution to move quickly and deliver what customers want" said Arto Nummela, CEO-designate of HMD.

Nokia's tie-up with FIH Mobile

Nokia Technologies said it has also signed an agreement with FIH mobile that will own the remainder of Microsoft's feature phone business assets, including manufacturing, sales and distribution.

As per the agreement, both the companies will form a collaboration framework to "support the building of a global business for Nokia-branded mobile phones and tablets".

This agreement will also give HMD full operational control of sales, marketing and distribution of Nokia-branded mobile phones and tablets with with exclusive access to the global sales and distribution network that FIH will be acquiring from Microsoft along with access to FIH's device manufacturing, supply chain & engineering capabilities and its suite of proprietary mobile technologies and components.

"Today marks the beginning of an exciting new chapter for the Nokia brand in an industry where Nokia remains a truly iconic name. Instead of Nokia returning to manufacturing mobile phones itself, HMD plans to produce mobile phones and tablets that can leverage and grow the value of the Nokia brand in global markets. " said Ramzi Haidamus, president of Nokia Technologies.

"Working with HMD and FIH will let us participate in one of the largest consumer electronics markets in the world while staying true to our licensing business model." Haidamus added.